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Gold prices surge to a five-month high as U.S. inflation hits 30-year peak

Gold prices surge to a five-month high as U.S. inflation hits 30-year peak
Jordan Major

In early trading on Wednesday, November 10, 2021, gold prices rose steadily to almost hit a five-month high after the latest inflation reading in the United States.  

At the time of writing, gold was up $16.30 at $1,848.00 per ounce, whereas Comex December silver was up $0.282 at $24.58. 

On a technical level, bulls in December gold futures have a strong overall near-term technical edge and are gaining pace. For instance, on the daily bar chart, an uptrend has been in place for five weeks. Bulls’ next price target is to post a closing above sturdy resistance at $1,900.00.

On the other hand, the bears’ next short-term price target is to bring futures prices below strong technical support at the November low of $1,758.50, which serves as a technical support level. Resistance is first visible at $1,850.00, followed by $1,860.00.

24 Hour Spot Gold. Source: Kitco.com

Consumer price index released

The recently announced consumer price index (CPI) for the United States for October came in at 0.9% and a 6.2% increase year on year, although the CPI was predicted to rise to 0.6% from September and to 5.9% year-over-year. 

Consequently, the CPI readings in October were the highest in more than 30 years in the United States. The producer pricing index for the United States showed an increase of 8.6% year on year on Tuesday 9 November as the energy percentage changed by 30% over 12 months.

12-month percentage change CPI. Source: U.S. Bureau of labor Statistics

The White House Council of Economic Advisors tweeted:

“Inflation, as measured by CPI, increased 0.9 percent month-over-month in October—above expectations and above the monthly rates seen in July, August, and September. Price increases were relatively broad-based.”

There was also some strong inflation data coming out of China as their producer price index (PPI) increased 13.5% year on year in October, as per data released on Wednesday, which is a rise of 10.7% from September. According to current records, this is the quickest factory gate price increase ever recorded as extreme weather and coal shortages are having an impact on China’s PPI.

National debt on the rise

To make matters worse, national debt continues to be a topic of discussion in the global economic discourse, as most countries are on the verge of reaching crisis levels. Surprisingly, several of the most advanced economies are among the most impacted, with national debt numbers soaring to unprecedented heights. 

According to data acquired by Finbold, the cumulative national debt of the United States, Japan, and China has hit $52.35 trillion as of November 2021. After reaching $46.87 trillion in November 2020, the collective debt has increased by 11.6% in the last year. This has resulted in an increase in the total national debt of a remarkable $5.48 trillion over the previous 12 months.

Hedge against inflation

Consequently, many are turning towards gold, stocks, and cryptocurrencies, amongst other forms of stores of value, as a hedge against inflation.

It’s worth mentioning that Wheaton precious metals CEO Randy Smallwood says inflation is becoming a significant threat and is now playing a vital part in the procurement of commodities.

“Those are the core materials that we build all of our products from. And so, there’s no doubt that inflation is becoming a greater and greater risk as we go forward. And it’s going to play into it. I will say that right now because the commodity prices have climbed substantially,” he said.

Notably, Asian-listed gold ETFs had inflows of 1.3 tons ($74 million) in October, led by China, whose holdings increased to record highs due to worse economic indicators and mediocre performance in the local equities markets. 

Elsewhere, the flagship digital currency Bitcoin is trading at all-time highs, having recently broken above $68,000, adding over 350,000 new holders in a month as investors seek alternative investment vehicles, with Bitcoin stealing the spotlight.

Bitcoin has gradually emerged as a viable substitute to gold as a store of wealth in 2021, with its price skyrocketing. This year, Bitcoin ROI has surpassed most commodities, stocks, currencies, and indices.

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